Quality of Information and Oligopolistic Price Discrimination

Qihong Liu () and Konstantinos Serfes ()

Industrial Organization from EconWPA

Abstract: Recent developments in information technology (IT) have resulted in the collection of a vast amount of customer specific data. As the IT advances the quality of such information improves. We analyze a sequential spatial model of oligopolistic third degree price discrimination where the firms use the available information to classify the consumers into segments and charge each consumer group a different price. Higher information quality increases the number of identifiable consumer groups. Among our findings: i) when the information quality is low, a unilateral commitment not to price discriminate arises in equilibrium, but for high information precision such a commitment is a dominated strategy and the game becomes a prisoners' dilemma and ii) equilibrium profits exhibit a U-shape relationship with the information quality.

Keywords: Price discrimination; Information quality; Information acquisition. (search for similar items in EconPapers)
JEL-codes: D43 L13 O30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2002-08-07
Note: Type of Document - pdf; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; pages: 34 ; figures: included

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http://129.3.20.41/eps/io/papers/0207/0207007.pdf (application/pdf)

Related works:
Working Paper: Quality of Information and Oligopolistic Price Discrimination (2002)
Journal Article: Quality of Information and Oligopolistic Price Discrimination (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0207007

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